Inequality is an important issue for the UPA government. The Approach Paper to the 11th Five Year Plan (2007-12) adopted in December 2006, mentions “inclusive growth” in the title itself. There is a specific chapter on bridging divides. Inequality and the allied notion of poverty can take different forms. In the last resort, development and deprivation are about individuals, since specific individuals may be poor or earn low levels of income relative to others. Ascribing poverty or inequality to collective identification, be it based on geography or caste (SCs, STs, OBCs, religious minorities) or even gender amounts to simplification. Collective identification can commit the double error of not including the deprived in the assumed ‘have’ category or of including the developed in the assumed ‘have-not’ category. There is also a distinction between poverty and inequality. Poverty is an absolute concept, while inequality is a relative one. It is logically possible for standard of living of the poor to increase while inequality also increases because standard of living of the rich has increased by relatively more and it is by no means obvious this is undesirable.

The answer depends on the variable. Poverty (or inequality) is not only about income and/or expenditure. They have other dimensions too, such as unequal access to education, health and physical infrastructure and participation in decision-making processes. One can argue that unequal access to social or physical infrastructure is undesirable. But it is difficult to argue, equally convincingly, that inequality in incomes is bad, especially if absolute living standards of the poor improve. For a long time, the poverty/inequality debate in India was mired in methodological issues concerning comparability of large sample NSS data of 1999-2000 with that of 1993-94. This changed with availability of NSS 2004-05 (61st round). In a study, Laveesh Bhandari (a fellow Express columnist) and I tracked what has happened to poverty and inequality between 1993-94 and 2004-05, a period that almost coincides with liberalisation. These are our own estimates, since we have some problems with Planning Commission figures. First, the poverty story, with poverty ratio defined as percentage of population below the poverty line. India’s poverty line should certainly change, since it doesn’t include health or education as items of consumption expenditure. At that time, it was thought these would be provided by the state — but that’s a separate issue.

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